The project had two main objectives: reduce cheque fraud; and make accounts payable (AP) a revenue generating department.
In 2012, Sunsweet adopted Bank of America Merrill Lynch’s payroll and vendor payments solutions, Money Network and e-Payables.
The benefits of the solutions include the following:
The 30/7 grace period adopted by Sunsweet as a feature of the ePayables solution allows it to benefit from increased float on its vendor payments, which in turn has enabled the company to reduce its reliance on external credit lines.
As a result of reducing the use of cheques and thus the number of items processed using Positive Pay, the company achieved lower bank fees. Meanwhile, the reduced need for cheque signing and the streamlined reconciliation process have resulted in extra cost savings. The company was able to transform AP from a cost centre to a revenue generating unit by taking advantage of a rebate based on vendor spend.
Sunsweet has gained process efficiencies as a result of reducing the need for cheque signing and the associated need for executive approvals. Meanwhile, fewer external controls are now required because the company has introduced internal controls using the ePayables solution, which still require payments to be approved before they have been released.
Sunsweet has also adopted and implemented the daily remote deposit processing of cheques using a scanner provided by the bank. This has enhanced and improved the company’s cash flow while saving time going back and forth to the branch. With enhanced cash flow, the company was able to reduce borrowing against the credit line.
Finally, days payable outstanding (DPO) has been increased while the risk of cheque fraud has been greatly reduced.
As Eva Price, Cash Manager (Acting Treasurer), Sunsweet Growers explains, “at the beginning of the project we had a small T&E card programme in place but didn’t use card payments for vendor payments. I personally have had contacts with other companies who had adopted a purchasing card model and realised this would give us an opportunity to transform our AP from an expense item into a revenue source.”
The first payment file was submitted in December 2012. The company has been actively signing up some vendors to participate in this ePayables programme. Not only that they get paid sooner than our terms with them, but at the end of the day it is a win-win situation for both. They enjoy the cash flow while Sunsweet enjoys the float for not having to pay Bank of America Merrill Lynch until 30 days later.
Price concludes, “unlike many companies, we quickly identified the opportunities and benefits offered by the Money Network and e-Payables solutions, and opted to implement both simultaneously in the form of a single project. It is unusual to see companies within the agricultural food space embracing technology to this level. Our ability to step outside our peer group and take a forward thinking approach to technology is worthy of recognition – as is the way in which we have overcome resistance from unions and vendors.”
Overall, this is a cross-departmental initiative which has been driven by Price while also involving the AP manager, Assistant Controller (who directs the payroll staff), Controller and CFO, as well as the company’s IT resources.
“In association with Bank of America Merrill Lynch’s new and innovative ideas in the banking world, we are very much grateful to our past and current relationship and we look forward to our continued partnership for the many challenging years ahead,” says Price.